What Is Put Call Ratio in Crypto?

In crypto trading, having a clear grasp of market sentiment is critical before committing capital. One powerful but often overlooked tool used by experienced traders to assess crowd behavior is the Put Call Ratio (PCR).

Originally a staple in traditional finance, the Put Call Ratio has now found its place in cryptocurrency trading, offering valuable insight into whether traders are leaning bullish or bearish on a particular asset. In this guide, we’ll explain what the put call ratio is, how it works in crypto, what levels to watch, and how to use it to improve your trading decisions.

What Is A Put Call Ratio (PCR) In Crypto?

The Put Call Ratio (PCR) is a sentiment indicator calculated by dividing the number of outstanding put options by the number of outstanding call options:

Put Call Ratio = Total Put Options / Total Call Options

• A put option gives the buyer the right (but not the obligation) to sell an asset at a predetermined price—used when a trader expects the price to fall.

• A call option gives the buyer the right (but not the obligation) to buy an asset at a predetermined price—used when a trader expects the price to rise.

By comparing how many put options are being bought relative to call options, traders get a real-time snapshot of market sentiment.

What Does the Put Call Ratio Tell Crypto Traders?

• PCR > 1.0: More puts than calls → Bearish sentiment

• PCR < 1.0: More calls than puts → Bullish sentiment

• PCR = 1.0: Equal puts and calls → Neutral (but uncommon in crypto)

Due to crypto’s strong long-side bias, a PCR of 0.7 is often seen as a neutral baseline. Anything above may indicate increasing bearishness, while lower readings signal growing bullishness.

Put Call Ratio Example: Analyzing Bitcoin Market Sentiment

Let’s say a trader named Bob wants to determine whether to go long or short on Bitcoin (BTC). He checks the options data and finds:

• Total BTC put options: 1,800

• Total BTC call options: 3,000

Using the formula:

PCR = 1,800 / 3,000 = 0.6

A PCR of 0.6 suggests bullish sentiment, as more traders are buying calls than puts. Bob may interpret this as a signal to take a long position on BTC.

How to Use the Put Call Ratio in Crypto Trading

1. Measure Market Sentiment

The PCR helps you gauge whether the majority of traders are positioning for upside or downside moves. It's especially useful when confirming setups from other technical indicators.

2. Identify Potential Reversals (Contrarian Approach)

Extreme readings in the PCR can signal overbought or oversold conditions:

• A very high PCR (e.g., >1.2) may suggest panic or fear, potentially signaling a bullish reversal.

• A very low PCR (e.g., <0.5) may indicate extreme optimism, a potential bearish reversal point.

Contrarian traders use these signals to take the opposite stance when sentiment becomes too one-sided.

3. Complement with Other Tools

The PCR works best when used in conjunction with other indicators like:

• RSI (Relative Strength Index)

• MACD (Moving Average Convergence Divergence)

• Open Interest and Volume

• Trendlines and chart patterns

Limitations of the Put Call Ratio

While the Put Call Ratio offers key insights, it’s not a standalone predictor of price. Traders should avoid relying solely on it for trade decisions. Factors like news events, macroeconomic data, and liquidity conditions can also influence price action, regardless of sentiment indicators.

Experienced traders use the PCR as part of a broader strategy, combining it with risk management, diversification, and technical analysis to improve their edge.

Experienced traders know that trading in the crypto markets is all about probabilities and having probabilities skewed in their favor. The effective use of the put call ratio alongside other trading indicators and proper risk management strategies can help traders move probabilities in their favor.

Now that you understand how the Put Call Ratio works, it’s time to put that knowledge into action. Trade over 350 cryptocurrencies with low fees, tight spreads, and the ability to earn while trading—all on Flipster, the platform built for serious traders.

Disclaimer: This material is for information purposes only and does not constitute financial advice. Flipster makes no recommendations or guarantees in respect of any digital asset, product, or service. Trading digital assets and digital asset derivatives comes with a significant risk of loss due to its high price volatility, and is not suitable for all investors. Please refer to our Terms.